Automated Investing Returns to Prosper

When Prosper introduced Quick Invest in July of this year they discontinued their automated plans. These plans were very popular with p2p investors because it meant you could invest in loans that met your filtering criteria without having to login to Prosper.com.

At the time many investors expressed disappointment about the end of automated plans. Well the good new is they are back…with a slight difference.

Last night Prosper introduced Automated Quick Invest (as well as some cosmetic changes to the My Account screen). It is a simple process that allows investors to use saved searches to invest in new loans without having to login. If you have used Quick Invest you will find this new feature very easy to use.

There are really just two steps. Create a Saved Search based on your filtering criteria and then set the maximum investment amount per loan. You will be notified via email whenever a Quick Invest order takes place or you will be able to see them in your Pending Investments screen.

Automated Quick Invest Levels the Playing Field

One of the unpublicized features of Automated Quick Invest is that it levels the playing field between large institutional investors and the small retail investors. I have written before about big investors like Worth-blanket2 investing in an entire loan leaving little or nothing for the retail investors.

With the new system they will not be able to bully their way into every loan they would like. The way the system works is that it queues up all the investors using Automated Quick Invest who want a particular loan and then randomly picks investors until the loan is completely funded. So occasionally you may miss out on a loan but you have just as much chance of scoring an investment as the larger investors.

I think this is a great move by Prosper. I have already signed up for this new way of automated investing and I will be thankful not to have to login twice a day at 9am and 5pm to make sure I find all the loans that meet my strict criteria.

What do other Prosper investors think? Will you be using Automated Quick Invest? As always, I am interested to hear your comments.

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Comments

I can’t speak for the automated returns as I haven’t used them, but I really like the new layout to see annualized returns, returns per year, total invested each year, promotion returns, and total account value. I think they stepped up to the plate with the new format. Very easy to read, plus the old look is still at the bottom of the page for those that preferred that method of looking at their account.

@Bilgefisher, Interesting. I wrote the post last night after getting a heads up from Prosper about the changes. But they mentioned nothing about seeing the annualized returns now. That is news to me. But I like it as well. It is not surprising, though, they are becoming more focused on sharing their great return numbers. Might have to do another post about that change.

Agree that the charts and annualized returns are the best change… though, granted, I fell under the “concierge service” (hate that term though) before they brought it back to everyone, so this isn’t a new change… I’ve been pressing the Prosper people calling me into making these kinds of changes for forever. Not saying that I had anything to do with it, lol, but just saying it’s good to see. One area Prosper has fallen behind LC is the image of ‘professionalism.’ To really get more serious investors (even just serious retail investors) they need to give off the vibe of being a serious investment/financial company. That usually means plenty of imformation in an easy to use format and ways to parse all the data. Even if investors don’t use everything, it adds legitimacy to the business. I’d still like to see more graphs and histories and maybe a break down of the ROI for each plan (don’t know if that’s in the new one yet since haven’t had chance to dig in), and somehow an inclusion of folio purchases. Another big one I’d like to see is a table of expected repayments similar to what Kiva provides… while it would never be completely accurate or perfectly predictive (due to processing dates, early/late payments, etc), it would help people build a steady income throughout a month and balance their loans and just generally give a good idea of their portfolio and more data that people can use to inform their decisions. Overall I like where they’re going and glad they’ve finally made some of these changes… I think they can only continue to go up from here.

“It would help people build a steady income throughout a month ”
@Shawn

I am glad to see someone else wanting to see this happen. When I have talked to people at LC this is something that I have asked for. A way to automatically depositing interest back into a checking account while keeping the principle in the LC account for reinvestment.

I agree, the layout is very nice. I like the large account value & annualized return numbers, especially now that my annualized returns apparently are in the TRIPLE digits! No, I’m not counting the decimal places.

@Shawn, I am sure it helped to have these conversations with Prosper. I have also told them they needed to make some improvements here and to be honest I didn’t think we would see these changes this soon. But as you say, it is a movement in the right direction.

@Charlie, I think some more automated options for withdrawal and reinvestment would be a welcome feature at both companies. It would certainly make for a more robust platform.

@Dan, Hmmm. It seems that there may be a few bugs in the ROI calculation. I am going to do some more analysis of these new features and dig a bit deeper. But I presume you haven’t lost more than 100% of your principal….I will mention it to them. We want to be able to trust these numbers.

@Dan – You seem to be pointing to the ROI number as a Prosper mistake, without offering full explanation of your investments on Prosper, thus giving the full story to readers. The loss number is accurate the way it is measured, but is NOT your personal ROI from investing in Prosper loans.

Do to privacy laws, I can’t give you a full explanation of your triple digit ROI publicly without your permission. May I have your permission to explain it publicly which would require explaining the number of loans you have on Prosper?

In general, I can say this. 1) The ROI number is an annual ROI, so in theory it can be less than -100%. 2) The ROI number doesn’t include any profit gained from selling loans on Folio, even if the # of loans sold and the profit was substantial. 3) The ROI number doesn’t reflect any new loans purchased within the last 30 days (because they haven’t made a payment,) no matter what the percentage these are of the total portfolio.

At Prosper we are very concerned with accuracy. We are also cognisant of the need for a standard ROI measurement for the industry. We will be discussing this next Thursday in a Summit with bloggers and we invite anyone to attend. I believe Peter is posting the details on his site.

“The way the system works is that it queues up all the investors using Automated Quick Invest who want a particular loan and then randomly picks investors until the loan is completely funded. So occasionally you may miss out on a loan but you have just as much chance of scoring an investment as the larger investors.”

I think a better route to go would be for them to allow everyone a $25 investment and then proportionally invest the remainder of the loan by the amount each individual wishes to invest. Here is what it would look like in the breakdown for a $2,000 listing:

Alternatively, they could just do a straight percentage, but that would result in investments of less than $25, which I think Prosper is generally opposed to having. If, for a $2,000 listing, there are more than 80 different lenders, then a random draw of investors would take place with each of the winners getting a $25 investment (of course, with a straight percentage they could have more than just 80 lenders…just sayin’).

Those are just my own musings. This is a step in the right direction, and they won’t be able to please 100% of the people 100% of the time. Though I’d guess the people at Prosper who active readers of the comments sections may think that they can’t please anyone at any time! …at least not on this board. 😉

@Charlie, I like the idea of automatically depositing interest back into a checking or savings account, too. I just don’t know about the logistics. It already takes a long time to transfer money in and out of an account, and my *assumption* is that there are fees associated with the transfers that Prosper is paying (hence instant access to transfers greater than $500). It might be something they could implement, but if they’re paying fees for every transfer they’d probably start passing those costs on to us. And while people might like it, it may not be cost effective to do it for everyone either, especially if someone is only receiving $0.50/day in interest on average. (maybe doing a transfer once a week may be better than every business day?) I think for a lot of us here on this board the idea is to be as inactive on the site as possible (it is supposed to be *passive* income, after all!). Any steps in that direction would be welcome, though!

Glenn………..Let’s be clear. I’m not suggesting that my -104.9% Prosper ROI number is a mistake, as I’m sure that Glenn can lead us on a step by step walk in fantasy land that will show how this is all correct in that alternate reality…………What I am suggesting is that the number makes no sense, isn’t real, has no basis in the real world & is, among other things, completely WORTHLESS.

Now, Glenn points out that new investments in the last 30 days aren’t counted so I don’t need to address the fact that I’ve deposited $1200 in the last 30 days & purchased 40+/- notes. Glenn also points out that sales on Folio don’t count. Interesting, but I also have accounts at Lending Club & though they say that as well I’ve bought & sold a lot more notes on Folio over there, yet my real return numbers are always within 2% of the official NAR at Lending Club. Imagine that…………..it must sound miraculous huh Glenn. But let’s look at specifics:

Circa Feb 2011 & in the next few months thereafter I deposited a total of $1600 in Prosper & invested in 60 notes total. These were all purchased directly (not on Folio). Around July/August 2011 I decided to liquidate all notes in the account & withdraw all moneys. I proceeded to sell 55 notes on Folio, 3 had defaulted in the interim, 1 was paid back in full early & 1 was “late” which meant I couldn’t sell. When all was said & done I withdrew a total of $1631 & had only that 1 late note left in my account. So in summary I deposited $1600 & withdrew $1631 six months later. I’m no mathematician but I’m pretty sure that’s a positive ROI since I’m ahead $31. But more importantly, does that remotely sound like an annualized return of -104.9% to anyone? I mean really -104.9%??

So I repeat that the -104.9% number makes no sense, isn’t real & is, among other things, completely worthless. So yes, I treat it as a joke, because it is a joke……………regardless of whether Prosper can whip out some formula proving that it’s accurate or not.

I was also thrilled to get back the automated investing. But I think there is more to the story. It looks like you can have several Quick Invest selection criteria operating at once. Has anyone tried this out?
I have four searches set up under quick invest, and it looks like I could have more than one operating at the same time.
I also like the new look and feel and seeing the seasoned and all loans shown. Sounds like Dan B. won’t be satisfied until Prosper can calculate returns on his bank accounts, credit cards, FolioN AND Prosper, and maybe wash his car in the driveway.

Indeed it would make little sense for LC or P to send you small amounts of interestest earned every month due to transaction fee’s.

That expense could be reduced by only doing the transfer once monthly, and only if the account is generating over $XXX per month of interest. Say $250 or $500 min.

I think that is workable.
I was doing this 5-6 years ago with Treasury dirrect with 4wk,13wk,26wk,and 52wk Treasury notes. Back when you could get a decent return on those notes. 🙂
So I know its possible.

@Glenn, Thanks for chiming in with more details. I know you won’t be able to please Dan but it does sound like those active Foliofn investors will likely not be getting an accurate annualized return number. Maybe a better approach would be for those investors to receive a dash or n/a or something like that. Along with an explanation that there is not enough information to calculate an accurate return number.

I should also point to everyone that my Annualized Return for all notes matches very closely (within 0.6% of my XIRR() calculation) as I am sure it does for the majority of investors. I have sold just one note (out of 220) on the Folio platform and not bought any.

@Dan, I would also find it ludicrous to have a -104.9% number. You have made your case very clearly and we hear your frustration. This doesn’t mean, however, that the number if useless for everyone.

@Roy, While your system may be more equitable I think what we have now is a vast improvement on what we had. I will reserve judgement for now and see if I miss out on many loans to the likes of WB2 or Aberdeen.

@Graceful, I have two automated quick invests setup right now and plan on adding a third based on my saved searches. So, it is certainly possible to add multiple setup at once.

@Charlie, I am sure this is workable but I wouldn’t hold your breath. Simply because there are costs involved and LC and Prosper are not going to make it a high priority to help investors withdraw their money. This could change in the long run but I don’t see this happening in the next couple of years.

I recently started with Lending Club and wish to explore the possibility of automation. But the options / filters in its Portfolio Builder appear very limited. Is there perhaps another way to do this with Lending Club.

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